Archives for posts with tag: Distribution of Wealth

Bryan Caplan’s Myth of the Rational Voter puts forth the idea that systemic bias in the beliefs of voters exists in the realm of economics. Apparently the systemic bias can be expanded beyond bad policy-making to include biased beliefs about current conditions. Last October, Drake Bennett wrote an article in Business Week discussing American perceptions of wealth inequality. The article centers on research by Dan Ariely of Duke University and Michael I. Norton of Harvard Business School which found that the American public vastly underestimate both the extent of inequality and what the optimal distribution of wealth would be.

Ariely and Norton found that Americans think they live in a far more equal country than they in fact do. On average, those surveyed estimated that the wealthiest 20 percent of Americans own 59 percent of the nation’s wealth; in reality the top quintile owns around 84 percent. The respondents further estimated that the poorest 20 percent own 3.7 percent, when in reality they own 0.1percent.

And when asked to give their ideal distribution, they described, on average, a nation where the wealth distribution looks not like the U.S. but like Sweden, only more so—the wealthiest quintile would control just 32 percent of the wealth, the poorest just over 10 percent. “People dramatically underestimated the extent of wealth inequality in the U.S.,” says Ariely. “And they wanted it to be even more equal.”

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In an editorial written for the NY Times, former Bush Economic Adviser and current Harvard professor Gregory Mankiw discusses economic “guidelines” for President Obama to follow in hopes of finding common ground with the opposition Republican party.  Along with addressing a reformation of the incentive structure of current taxing practices, Professor Mankiw also espouses a Libertarian approach while addressing the distribution of wealth within the country.  He makes a compelling argument for working towards policy which focuses on achieving equality of opportunity (through educational reform) rather than equality of outcome.  A compelling read which addresses many of the fundamental economic debates facing this country’s policymakers.  Perhaps the President, as Professor Mankiw suggests, can truly find common ground with the new Congressional Republicans (at least economically that is).

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